If you have been an active investor over the last year or so like I have you have probably noticed a very different market at the end of year verse the start of the year. In short deals were easy to find during the first 4 months of the year as long as you had cash or a solid hard money lender. But then the market changed. The government created all these programs to restrict supply and increase demand.
The solid cash flow house went from easy to find to almost impossible. Most weeks I would make 10-12 offers on houses that meant my criteria and in every case I was now being out bid and sometimes by a large margin. I remember several houses going for 40% more than list price. Many houses would get 10+ offers within the first 48 hours. It started to feel much like 2005 all over again (Except the prices were much lower).
I refused to play in bidding wars and went 4 months without locking up a property which is my longest stretch in 5+ years. It wasn’t always easy but I stayed patient and just kept tracking properties. It was about mid year where I identified a particular duplex that would be a solid addition to my portfolio. I made a few calls and offered prices that were about 60% of list price. To say my offer was laughed at is not an understatement as the agent already had 10+ offers.
Well the property was quickly put in escrow but the buyer couldn’t close. So it came back on the market. I made the calls again and offered my same 60% of list price and was laughed at again. I was told they had multiple buyers willing to go over asking price. Sure enough it was in escrow again in a couple of days. This happened 4 times over 6 months. Each time I would call and offer the same amount and guarantee a close.
Well after 6 months and a dozen or so phone calls I just put this property in escrow at the exact number I offered 6 months ago. After doing my detailed walk through today with my repair team I am even more excited about this property. It will be my BEST DEAL of 2010 by far.
Lessons I learned from this. Be very comfortable with your numbers and don’t over pay if the market gets crazy and starts over paying. Keep a list of the properties you like as they may come back especially in this market with tight financing.
Most important always stay patient but persistent
Good Investing
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